Sunday, January 22, 2006

First link to HoCo Blog

HoCo Blog (aka Howard County Blog #2) yesterday posted his concerns about the recently approved Plaza Residences (aka the 22-story Building of Much Consternation). After discussing the importance of long term planning, he lays out an argument against the building.

It is on these grounds that I am gravely concerned about the new 22 story building that the Planning Board just approved. The nature of a condo building is a developer builds it and then sells off its units to individuals. Thus the financial interest of the developer is only for short term sales. In a housing market like the one we are currently in, the interests of the developer is simply to build it fast because they know that anything they build will sell. Thus the developer has no market incentive not to leave the community with a blight.

Nowhere is this problem in the 22 story building more apparent than in parking. The developer is building only 1.5 parking spaces per residential unit and many of these spaces are tandem parking (where cars park behind each other blocking each other in). Anyone who has ever parked in an underground garage in DC knows how cramped and hard to maneuver in garages can be. Now imagine the strains of constantly moving cars in such a cramped space puts on everyday life. Imagine the additional cost of nicks and scratches cars will inevitably get in such a place. No imagine someone who has bought a half million to a million dollar condo putting up with this parking situation for long. If the housing market declines it is just such units as these that will be the first to decline. And if that happens the developer will have gotten their money and be long gone and the community will be left with a blight.
As much as I'd like to be able to scoop up one of these condos in a couple years for $200,000 (or less, depending on the degree of blightedness), I don't see that happening. Ever.

It is true that most of the developer's interest is in the short term, but the only path to short term success is convincing buyers that their long term investment won't be a waste. To focus solely on the developer is to look only at half of the situation.

Potential buyers for this property, all of whom will be forced to shell out over half a million dollars, won't make a purchase without assuring themselves that their investment is sound. Many people buy things impulsively without thinking through all the factors, but such purchases rarely involve large, expensive things like homes. iPods, yes. Condos, um, not so much.

Once the developer has made his millions, these buyers become the stewards for the property, the ones with a large, vested interest in the success of the building. Almost all of them will know what they're getting into, and if the developer hasn't done enough to make the property attractive and to assure buyers that it won't result in blight, then people won't buy the condos.

Developers, one would imagine, spend a considerable amount of time conducting market research before proposing such large projects. This research--as well as their own past experience--guides many of the specific decisions related to the project--for instance, on-site amenities, location and tenant parking requirements (it should be noted here that the plan calls for 288 parking spaces for the residential units [and four spaces for a ground floor coffee shop], meaning there will be 1.8 spots per unit, not 1.5 as stated in the blog post).

At some point, in the midst of spreadsheets, market analyses, and sample pro formas, the developer realized that people would be willing to spend up to a million dollars to live on the graveyard of a past Bennigan's. If their calculations are right, we'll have a bunch a wealthy new neighbors. If not, we'll have a bunch of low-cost, amenity-laden condos for sale at low, low prices--"blight" seems like a bit of a stretch. However, since the developer clearly has a short term financial interest in this project, I'd put my money on the former.

7 comments:

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